Is Boyd Gaming’s Stock Too Much of a Gamble Right Now?

With shares of Boyd Gaming Corporation (NYSE:BYD) trading at around $5.69 is BYD an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

This is an interesting and ironic situation. As Boyd Gaming is making money off gamblers betting against the house, shorts are making money betting against Boyd Gaming. There has to be a movie in there somewhere, or at least a financial documentary. This isn’t your average short position, either. Over 21 percent of the float is short. That’s high … very high.

Longs are hopeful that Boyd Gaming can return to its heyday of the mid-2000s, but that doesn’t seem likely in the near future. Longs shouldn’t panic, though. Most companies in this industry find ways to survive when times are rough.

There is a lot of news out on Boyd Gaming and the industry recently, and not much of it is positive. News just came out today that New Jersey gambling revenue fell 28 percent in November compared to November 2011, which was mostly due to Hurricane Sandy. Casinos only suffered minor damage, but all casinos were forced to shut down for six days. Even if the casinos were open, it would have been difficult for people to get there considering roads were damaged and buses and trains weren’t running.

Longs who read this will no doubt fire away and point out that Boyd Gaming has casinos around the country. This is indeed true, which is why we should look at the numbers for more of a big-picture analysis.